CVT on immovable properties reduced

Tax rate cut from four to 2-2.5 per cent

KARACHI: The Sindh government, in the budget for fiscal 2010-11, announced on Friday the Capital Value Tax (CVT) on immovable properties would be two per cent for residential properties and 2.5 per cent for commercial assets.

CVT has been returned to the provincial government by the federal government after the 18th Constitutional Amendment.

Under the federal government, the CVT on immovable property was being collected at the rate of four per cent. Consequently, this move would allow for a relief of 37.5 per cent for commercial property holders and 50 per cent for residential property owners.

Now the Federal Board of Revenue (FBR) would no longer collect this levy. Last year, when the federal government had jacked up the duty to four per cent, the FBR had estimated a collection of Rs15 billion.

However, the result had been dismal as the FBR could collect only Rs2.5 billion in the outgoing fiscal year.

This was one billion rupees less than what had been collected when the CVT was two per cent a year earlier in 2008-09.

Stamp duty and
registration fee

The Sindh government also proposed a reduction in the rates of stamp duty on some financial instruments such as participation term certificate, term finance certificate and commercial papers to harmonise them with the rates of Islamabad and Punjab. The rate has been reduced from three to 1-2 per cent.

This move would help document these financial instruments which would have a positive effect on economic activities.

Furthermore, stamp duty is also being reduced in favour of Real Estate Investment Trusts (REITs) to facilitate resource mobilisation and investments through the vehicle of REITs in the formal sector. This is being done to aid rapid development of the real estate and housing sectors.

The Sindh budget also proposed an increase in the exemption limit of annual value for assessment of property tax from the existing limit of Rs24,000 to Rs48,000 for widows, minor orphans and permanently disabled persons.

Published in the Express Tribune, June 12^th, 2010.